Shareholders fight AT&T porn channel

TheAssociated Press

NEW YORK (AP) - A coalition of AT&T shareholders, including a who's who of mutual fund groups that characterize themselves as socially responsible, is protesting AT&T's addition of an adult-oriented channel to its growing cable empire.

“As shareholders, this is not the kind of economic activity we want to profit from.”
Jerome Dodson,Parnassus Fund

The action against one of the oldest and biggest U.S. companies is one more sign that socially conscious investors are becoming increasingly active in efforts to persuade large corporations to act as good citizens.

“We just don't like the idea of AT&T carrying hard-core pornography on its distribution system. We don't think a socially responsible company should carry that kind of programming,” said Jerome Dodson, president and portfolio manager for the Parnassus Fund (PARNX), a socially responsible fund group based in San Francisco.

“As shareholders, this is not the kind of economic activity we want to profit from,” he added.

Parnassus, which holds 35,000 shares of AT&T (T) in its $51 million Parnassus equity income fund, is one of four mutual fund groups in a 27-member coalition that has asked the telecommunications giant to reconsider its decision to distribute the Hot Network, a pay-per-view cable station that offers sexually explicit programming.

The coalition, which claims to own a combined 2.8 million AT&T shares, also includes pension funds and religious groups.

Dodson said Parnassus plans to enlist other AT&T investors in drafting a shareholder resolution voicing opposition to the Hot Network. If enough shareholders support the resolution, the measure will be voted on at AT&T's next shareholder meeting.

Such a resolution would not be enforceable under AT&T's rules of corporate governance, but it should get the attention of AT&T management, Dodson said.

AT&T has responded to the coalition's objections by citing its desire to provide its customers with viewing choices. In addition, the company has stressed that its digital cable service includes state-of-the-art technology that allows customers to block unwanted programming.

AT&T plans to give customers a “combination of choice in video programming, as well as a strong measure of control over the kinds of programming that flows into their homes,” said Rob Stoddard, a spokesman for AT&T Broadband, the parent company's cable unit.

Specifically, Stoddard said AT&T will respond to the concerns raised by the coalition by increasing its efforts to educate customers on the availability of the blocking technology.

AT&T Broadband's president, Daniel Somers, said in a letter to Dodson that the Hot Network will only be offered in areas where customer demand is strong enough to support it.

Furthermore, Somers added: “The service has easy-to-use controls that enable parents and family members to block any channel they consider undesirable. As has been our practice for many years, we'll completely block access to the channel, at no charge, upon customer request.”

Nevertheless, some coalition members aren't satisfied with AT&T's response.

Frank Rauscher, president and chief executive of the Aquinas Funds, a socially responsible fund group that applies Catholic values to its investment screening process, said his company is ready to employ a number of methods to draw attention to the controversy.

Some of those methods would call into question the ethical standards of AT&T's management, he said.

“Management that would get involved in this type of programming gives us cause for concern. We want AT&T management to understand we don't have any confidence in them,” Rauscher said.

Rauscher accused AT&T of entering the market for adult programming in an effort to boost AT&T's sagging stock price. AT&T's shares have plummeted nearly 50 percent since April. The company announced its decision to offer the Hot Network in May.

“This has to be some form of desperation measure to get their revenues up. It's a desperate maneuver to respond to a desperate situation,” Rauscher said.

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